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Private Equity: Silver Lake and Michael Dell Offer $24B to Take Dell Private

Michael Dell will remain in place as chief executive as part of the deal

Dell Inc. (Nasdaq: DELL) founder Michael Dell and private equity firm Silver Lake Partners have entered into a $24.4 billion agreement to take the company private.

Dell stockholders will receive $13.65 per share in cash. The price is 25 percent higher than Dell’s closing share price on Jan. 11 of $10.88, the last day before rumors of a take-private deal were published, as Mergers & Acquisitions reported.

Shares were trading at $13.63 on the morning of Feb. 5, the day the deal was announced. On Jan. 12, after reports of the sale were published, shares traded up to $13.17.

The computer company’s board of directors has approved the proposal. Michael Dell first approached the board in August with an interest in taking the company private.

The merger agreement provides for a period when the special committee, formed after Michael Dell approached the company about going private, can enter into negotiations with other parties for 45 days. Competing bidders would have to pay a $180 million termination fee.

Michael Dell, who owns 14 percent of the company, will stay in place as chief executive and chairman after the deal closes. Dell founded the company in 1984 while he was a student at the University of Texas at Austin. Dell, now the world's No. 3 computer maker, sold IBM-compatible computers built from stock components. Michael Dell dropped out of school after getting about $300,000 in capital from his family.

The deal is the biggest leveraged buyout since the financial crisis. 

The deal is funded by cash from Michael Dell, cash from investment funds affiliated with Silver Lake, cash from MSD Capital LP, a $2 billion loan from Microsoft Corp. (Nasdaq: MSFT), which supplies much of the software that Dell runs on its computers, rollover of existing debt, and debt financing committed by Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets, and cash on hand.

Silver Lake, based in Menlo Park, Calif., focuses on investing in technology companies. The firm has more than $14 billion in assets under management. It has invested in Alibaba, Ameritrade, Skype and many other technology companies. The firm sold its 70 percent stake in Skype to Microsoft for $8.9 billion in May 2011, after buying from eBay Inc. (Nasdaq: EBAY) for $1.9 billion.

The transaction requires regulatory approval and is expected to close before the second quarter of fiscal year 2014.

JP Morgan and Evercore Partners are acting as financial advisers, and Debevoise & Plimpton LLP worked as legal counsel to the special committee of Dell’s board of directors. Goldman Sachs & Co. is Dell’s financial adviser, while Hogan Lovells US LLP is acting as legal counsel. Wachtell Lipton Rosen & Katz is Michael Dell’s legal counsel. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets are Silver Lake’s financial advisers, and Simpson Thacher & Bartlett LLP is providing legal advice. 


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